Deltona official: Water/sewer rate cut to cost city $45 million in six years

Sunday

Oct 21, 2012 at 9:48 PM

By voting to lower water and sewer rates last week, city commissioners cut revenues by $45 million over the next six years and put in jeopardy their ability to build a new wastewater treatment plant, according to an email from the city attorney.

MARK HARPERSTAFF WRITER news

DELTONA — By voting to lower water and sewer rates last week, city commissioners cut revenues by $45 million over the next six years and put into jeopardy their ability to build a new wastewater-treatment plant, according to an email from the city attorney. Commissioners didn't know the consequences of their surprise vote Oct. 15 to all but abandon a five-year plan started in 2008 to increase rates by 17.25 percent a year. They will have a workshop on the rates at 4:30 p.m. Tuesday at City Hall, 2345 Providence Blvd., followed by a special meeting at 6:30 p.m. to formalize their action. Several residents in attendance at last week's meeting urged the rate reduction, noting Deltona residents' economic difficulties in recent years. Commissioner Fred Lowry, who helped set up the website savedeltona.com supporting candidates who pledged to lower the rates, made a motion to roll back rates by two years, or about $7 a month for water customers using 8,000 gallons and $40 a month for sewer customers. As part of his motion, Lowry asked city staff to continue seeking a low-interest state loan to build a new wastewater-treatment plant on the east side of Deltona. The plant, estimated to cost nearly $25 million, is viewed as critical to future economic growth in Deltona and along State Road 415 in Osteen. But City Attorney Becky Vose wrote in an email to commissioners Thursday that they should keep the rates at the 2011-12 level, where they were before last week's vote, and conduct a professional rate study on the impact of the rate cut. "If the rates were to be lowered to the extent voted by the City Commission, there would be insufficient funds to build the eastern wastewater plant, and there could be other extremely negative consequences," she wrote. A professional rate study is needed "considering the huge amount of money that is at possible risk to the city," she wrote. The study will have to be done next year in advance of a refinancing of the city's water and sewer bonds and "could also address any possible inequities in water vs. sewer rates, and could make recommendations to assist customers currently being hurt by rates," she wrote. Deltona, a city of 85,000 people, charges for water with rates comparable to other cities, but has considerably higher wastewater fees because only 17 percent of its customers are hooked up to the sewer lines with the rest on septic tanks. Lowry and others have complained that city staff had originally sold the five-year rate-hike plan by suggesting the city needed all of the money to meet its bond obligations. The city bought the water-and-sewer utility in 2003. City Manager Faith Miller took issue with that assessment in a memo last week, detailing all of the public hearings and information that had been provided prior to the 2008 vote. Deltona Mayor John Masiarczyk noted at the Oct. 15 meeting that the city's bond covenants extend beyond simply paying back what it owes. Lenders expect Deltona to continually maintain and improve the 50-year-old system, and the city's bond rating depends on the upkeep. Deltona should be able to obtain the refinancing as long as its credit rating remains high and the utility's finances remain strong, Vose wrote. "However, if the city's credit rating were to be lowered, or the finances of the water and sewer system were to appear to lenders to be weak, the city might be forced into financing not favorable to the city, which would no doubt result in substantially higher payments by the city needed to pay the $90 million debt," Vose wrote. "This could have an extremely negative impact on the water and sewer system, the city as a whole, and the citizens of the city." Such consequences could include the need for even higher water and sewer rates, as well as increased taxes, Vose wrote. Deltona could also lose out on its ability to obtain the low-interest state loan, she said. Prior to Vose's email, conservative activist Jamie Jessup urged commissioners to "embrace the new direction" and remain steadfast in keeping the lowered rates. "You should not be figuring how to outmaneuver the people's desire," Jessup wrote in an email to commissioners. "You should be working to accomplish what is obviously a cry of the people."